Subscribe To Our News Letter

Deductions allowed for individuals are largely available on the basis of payments towards investments or expenses. They reduce the taxable income and thus, the tax. The major deductions allowed by the Income Tax Act are under the Section 80-C, Section 80-D, Section 80-E and Section 24.

1) Section 80-C: Deductions that are under Section 80-C, where as 100% of the total amount invested or paid is deducted from your gross total income, subject to a maximum of Rs.1.00 lakhs. Investment options that are available under 80-C are discussed later.

2) Premium payments made towards health insurance for the tax payer, either her spouse or children qualify for deduction under Section 80-D. For this financial year, premium paid for health insurance for parents has also been included in this list and if the parents are senior citizens, then the deductions you can make are even higher.

4) Interest payable on home loan in a year gets tax deduction under Section 24 of the Income Tax Act. The loan should have been taken on or after 1st April 1999 and the house has to be self-occupied. The total deduction amount is upto Rs.1.5 lakhs a year. If you have a home loan, ask your banker for a statement showing the total amount of interest paid during the financial year. Please note if you have a second home loan for a house that is given out on rent, there is no upper limit on the deductions and the entire interest paid can be deducted from your income. But provided the second home has to be given on rent and should not be your vacant property.

5) Health plans: Premiums paid for any health related plans are deductible under Section 80-D of the Income Tax Act. However, tax benefit is not allowed if the premium is paid in cash. The premium can be on a plan for you and your spouse, children and even parents. The condition of dependency of parents has been removed from this financial year, which means that if your parents are independent, you can pay the premium for their health plan and claim the deduction. The maximum deduction for self, spouse and children is Rs.15, 000/- a year and additional deduction of Rs.15,000/- for parents. A higher amount of Rs.20,000/- is permitted for senior citizens of age 65 and above at any time during the financial year, in which the premium was paid. The premium amount is allowed as deduction from the total income of the assesses. Hence, if you are paying medical premium for self, family and parents, the limit is Rs.30, 000/- and if your parents are senior citizens, then it is Rs.35, 000/- To claim the benefit ask for a certificate from the Insurance Company showing how much premium you have paid for the health plans of any given policy.

6) Education loan: The interest paid on an education loan taken for higher studies, qualifies for deduction under Section 80-E. You can claim this benefit even if the loan is taken in your child’s or spouse’s name, as long as you are the one repaying it. There is no ceiling on the interest portion of your educational loan. The principal repayment does not get a tax advantage, unlike the home loan. The deduction benefit on interest is allowed for maximum 8 years or till the interest is fully paid.

7)Charity: This tax benefit comes under Section 80-G and to avail this tax benefit, donations must be made only to specified trusts. The tax rate also varies depending upon the Trust, e.g. a contribution to the Prime Minister Relief Fund gets a 100% tax deduction while one made on National Children’s Fund gets 50% deduction only.

After counting all the applicable deductions and thus, bringing down your gross total income, you are left with the taxable income.

Remember, filing of return is compulsory if the taxable income exceeds basic limit as indicated in tax rates, even if all the taxes have been deducted by an employer or otherwise at source. If you are a businessman or a professional and have incurred losses, you still need to file your return and show the losses. There is surcharge and education cess that is levied on the tax payable. Surcharge is at 10% of the tax amount and has to be paid if annual gross income exceeds Rs.10.00 lakhs. Education cess is 3% of the amount of the Income Tax and has to be paid by all tax-payers. Hence, for any individual, whose annual salary exceeds Rs.10.00 lakhs, the tax rate is pushed from 10% to 10.3%, from 20% to 20.6% and the highest tax slab goes at 30.9%. The rate becomes 33.99% including surcharge and education cess in total.

Please note the deductions as I mentioned before, are done in order to lower down your gross total income that comes under tax and for this, the Income Tax Law has come out with various Sections under which 80-C, 80-CCC, 80-D and few others like 80-G, 80-DD and 80-E also account for.